Open Text Reports Third Quarter Fiscal Year 2013 Financial Results and Announces Quarterly Dividend Program

Transcription

1 Open Text Reports Third Quarter Fiscal Year 2013 Financial Results and Announces Quarterly Dividend Program Waterloo, ON, April 24, Open Text (TM) Corporation (NASDAQ:OTEX) (TSX: OTC), announced today its financial results for the third quarter ended. Financial Highlights for Q3 FY13 (1) Total revenue for the period was $337.7 million, up 16% Y/Y License revenue was $69.0 million, up 13% Y/Y Cloud services revenue was $44.4 million Non- EPS, diluted was $1.26 compared to $1.01 Y/Y, up 25% Y/Y; EPS, diluted was $0.44 compared to $0.59 Y/Y (2) Non- income from operations was $90.4 million and 27% of revenues; income from operations was $40.9 million and 12% of revenues (2) Operating cash flow was $116.8 million compared to $96.6 million Y/Y, up 21% Y/Y, with an ending cash balance of $446.9 million. "We are committed to delivering value to our stockholders through technology innovation, strategic acquisitions and now through a dividend, said OpenText CEO Mark J. Barrenechea. "We generated $333.1 million in operating cash flow over the last twelve months and we are running our business at record operating margins. We have always been committed to rewarding our stockholders' investments in OpenText and the Board has decided that it is the right time to declare a dividend for our stockholders. Business Highlights Services, technology and consumer goods industries saw the most demand 8 license transactions over $1 million and 13 license transactions between $500K and $1 million Customer successes in the third quarter include Enbridge, The Planning Inspectorate, Freescale, RS Components, Toray, Hydro Quebec, YPTO, CGI, SSE plc, Volvo and Hoffman-La Roche OpenText announces 7 new products: OpenText InfoFusion 1.0, StreamServe 5.6, OpenText SecureiX, Employee File Management (EFM) software for use with SAP solutions, OpenText Smart Process Applications, OpenText Archive, OpenText Media Management 7.2 OpenText acquires Resonate Knowledge Technologies OpenText appoints Kevin Cochrane as Chief Marketing Officer Gartner recognizes OpenText in Business Process Management suites report Independent research firm highlights OpenText's BPM capabilities OpenText honored as 2013 SAP Pinnacle Award recipient Dividend Program Highlights The Company also announced today that it has adopted a policy to declare non-cumulative quarterly dividends to holders of its common shares. The Board of Directors has declared an initial dividend of $0.30 per share, payable on June 21, 2013, to shareholders of the Company of record on May 31, The dividends to be paid on June 21, 2013 are designated as eligible dividends for the purpose of section 89 of the Income Tax Act (Canada). 1

2 Summary of Quarterly Results Q3 FY13 Q2 FY13 Q3 FY12 % Change (Q/Q) % Change (Y/Y) Revenue (million) $337.7 $352.2 $292.3 (4.1)% 15.5% gross margin 64.2% 65.2% 63.6% (100) bps 60 bps operating income margin 12.1% 19.1% 9.3% (700) bps 280 bps EPS, diluted $0.44 $1.04 $0.59 (57.7)% (25.4)% Non- gross margin (2) 71.2% 71.8% 71.0% (60) bps 20 bps Non- operating margin (2) 26.8% 32.1% 25.2% (530) bps 160 bps Non- EPS, diluted (2) $1.26 $1.58 $1.01 (20.3)% 24.8% Summary of Year to Date Results Q3 FY13 Q2 FY13 Q3 FY12 % Change (Y/Y) (bps) Revenue (million) $1,016.1 $678.4 $ % gross margin 64.2% 64.1% 65.2% (100) bps operating income margin 14.6% 15.8% 12.2% 240 bps EPS, diluted $1.80 $1.37 $2.00 (10.0)% Non- gross margin (2) 71.2% 71.1% 72.3% (110) bps Non- operating margin (2) 29.2% 30.5% 27.2% 200 bps Non- EPS, diluted (2) $4.14 $2.89 $ % Conference Call Information The public is invited to listen to the earnings conference call at 5:00 p.m. ET (2:00 p.m. PT) by dialing (toll-free) or (international). Please dial-in 15 minutes ahead of time to ensure proper connection. Alternatively, a live webcast of the earnings conference call will be available on the Investor Relations section of the Company's website at An audio replay of the conference call will also be made available approximately two hours after the conclusion of the call. The audio replay will remain available until 11:59 p.m. on May 8, 2013 and can be accessed by dialing (toll-free) or (international) and entering the confirmation code: followed by the number sign. Please see below note (2) for a reconciliation of non-us GAAP- based financial measures used in this press release, to US GAAP based financial measures. About OpenText OpenText is the largest independent software provider of Enterprise Information Management (EIM). For more information please visit Cautionary Statement Regarding Forward-Looking Statements Certain statements in this press release, including statements about the financial conditions, and results of operations and earnings for Open Text Corporation ( OpenText or the Company ), and declaration of quarterly dividends, may contain words such as could, expects, may, should, will, anticipates, believes, intends, estimates, targets, plans, envisions, seeks and other similar language and are considered forward-looking statements or information under applicable securities laws. These statements are based on the Company's current expectations, estimates, forecasts and projections about the operating environment, economies and markets in which the Company operates. These statements are subject to important 2

3 assumptions, risks and uncertainties that are difficult to predict, and the actual outcome may be materially different. The Company's assumptions, although considered reasonable by the Company at the date of this press release, may prove to be inaccurate and consequently the Company's actual results could differ materially from the expectations set out herein. Actual results or events could differ materially from those contemplated in forward-looking statements as a result of the following: (i) the future performance, financial and otherwise, of OpenText; (ii) the ability of OpenText to bring new products to market and to increase sales; (iii) the strength of the Company's product development pipeline; (iv) the Company's growth and profitability prospects; (v) the estimated size and growth prospects of the EIM market; (vi) the Company's competitive position in the EIM market and its ability to take advantage of future opportunities in this market; (vii) the benefits of the Company's products to be realized by customers; (viii) the demand for the Company's product and the extent of deployment of the company's products in the EIM marketplace; and (ix) the Company's financial condition and capital requirements. Forwardlooking statements may also include, without limitation, any statement relating to future events, conditions or circumstances. The risks and uncertainties that may affect forward-looking statements include, but are not limited to: (i) integration of acquisitions and related restructuring efforts, including the quantum of restructuring charges and the timing thereof; (ii) the possibility that the Company may be unable to meet its future reporting requirements under the Securities Exchange Act of 1934, as amended, and the rules promulgated there under; (iii) the risks associated with bringing new products to market; (iv) fluctuations in currency exchange rates; (v) delays in the purchasing decisions of the Company's customers; (vi) the competition the Company faces in its industry and/or marketplace; (vii) the possibility of technical, logistical or planning issues in connection with the deployment of the Company's products or services; (viii) the continuous commitment of the Company's customers; and (ix) demand for the Company's products. For additional information with respect to risks and other factors which could occur, see the Company's Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and other securities filings with the SEC and other securities regulators. Unless otherwise required by applicable securities laws, the Company disclaims any intention or obligations to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. For more information, please contact: United States: Greg Secord Vice President, Investor Relations Open Text Corporation San Francisco: (415) New York: (646) gsecord@opentext.com Canada: Sonya Mehan Senior Manager, Investor Relations Open Text Corporation ext smehan@opentext.com Copyright 2013 Open Text Corporation. OpenText is a trademark or registered trademark of Open Text SA and/or Open Text ULC. The list of trademarks is not exhaustive of other trademarks, registered trademarks, product names, company names, brands and service names mentioned herein are property of Open Text SA or other respective owners. All rights reserved. For more information, visit: Notes (1) All dollar amounts in this press release are in U.S. Dollars unless otherwise indicated. (2) Use of Non-GAAP Financial : In addition to reporting financial results in accordance with US GAAP, the Company provides certain non-us GAAP financial measures that are not in accordance with US GAAP. These non- US GAAP financial measures have certain limitations in that they do not have a standardized meaning and thus the Company's definition may be different from similar non-us GAAP financial measures used by other companies and/or analysts and may differ from period to period. Thus it may be more difficult to compare the Company's financial performance to that of other companies. However, the Company's management compensates for these limitations by 3

4 providing the relevant disclosure of the items excluded in the calculation of non-us GAAP net income and non-us GAAP EPS both in its reconciliation to the US GAAP financial measures of net income and EPS and its consolidated financial statements, all of which should be considered when evaluating the Company's results. The Company uses the financial measures non-us GAAP EPS and non-us GAAP net income to supplement the information provided in its consolidated financial statements, which are presented in accordance with US GAAP. The presentation of non-us GAAP net income and non-us GAAP EPS is not meant to be a substitute for net income or net income per share presented in accordance with US GAAP, but rather should be evaluated in conjunction with and as a supplement to such US GAAP measures. OpenText strongly encourages investors to review its financial information in its entirety and not to rely on a single financial measure. The Company therefore believes that despite these limitations, it is appropriate to supplement the disclosure of the US GAAP measures with certain non-us GAAP measures for the reasons set forth below. Non-US GAAP net income and non-us GAAP EPS are calculated as net income or net income per share on a diluted basis, excluding, where applicable, the amortization of acquired intangible assets, other income (expense), share-based compensation, and restructuring, all net of tax. The Company's management believes that the presentation of non-us GAAP net income and non-us GAAP EPS provides useful information to investors because it excludes non-operational charges. The use of the term non-operational charge is defined by the Company as those that do not impact operating decisions taken by the Company's management and is based upon the way the Company's management evaluates the performance of the Company's business for use in the Company's internal reports. In the course of such evaluation and for the purpose of making operating decisions, the Company's management excludes certain items from its analysis, such as amortization of acquired intangible assets, restructuring costs, share-based compensation, other income (expense) and the taxation impact of these items. These items are excluded based upon the manner in which management evaluates the business of the Company and are not excluded in the sense that they may be used under US GAAP. The Company believes the provision of supplemental non-us GAAP measures allows investors to evaluate the operational and financial performance of the Company's core business using the same evaluation measures that management uses, and is therefore a useful indication of Open Text's performance or expected performance of future operations and facilitates period-toperiod comparison of operating performance. As a result, the Company considers it appropriate and reasonable to provide, in addition to US GAAP measures, supplementary non-us GAAP financial measures that exclude certain items from the presentation of its financial results in this press release. The following charts provide (unaudited) reconciliations of US GAAP based financial measures to non-us GAAP based financial measures for the following periods presented: 4

5 Reconciliation of selected measures to Non-GAAP based measures for the three months ended. Adjustments Note Non- Cost of revenues Cloud services 18,891 (50) (1) 18,841 Customer Support 27,497 (130) (1) 27,367 Professional Service and Other 48,252 (295) (1) 47,957 Amortization of acquired technology-based intangible assets 23,058 (23,058) (2) gross profit/ Non- gross profit 216,918 23, ,451 Research and development 43,003 (498) (1) 42,505 Sales and marketing 77,327 (2,634) (1) 74,693 General and administrative 27,061 (270) (1) 26,791 Amortization of acquired customer-based intangible assets 17,149 (17,149) (2) Special charges 5,444 (5,444) (3) income from operations / Non- income from operations 40,870 49,528 90,398 Other income (expense), net 237 (237) (4) Provision for income taxes 11, (5) 12,080 net income / Non- net income 25,811 48,398 (6) 74,209 earnings per share / Non- earnings per share-diluted $ 0.44 $ 0.82 (6) $ 1.26 (1) Adjustment relates to the exclusion of share based compensation expense from our non- operating expenses as this expense is excluded from our internal analysis (2) Adjustment relates to the exclusion of amortization expense from our non- operating expenses as the timing (3) Adjustment relates to the exclusion of Special charges from our non- operating expenses as Special charges hence excluded from our internal analysis (4) Adjustment relates to the exclusion of Other income (expense) from our non- operating expenses as Other related to continuing operations and are hence excluded from our internal analysis (5) Adjustment relates to differences between the tax provision of approximately 30% and a non- Non- net income $ 74,209 $ 1.26 Amortization 40, Share-based compensation 3, Special charges 5, Other (income) expense, net (237) provision for income taxes 11, Non- provision for income taxes (12,080) (0.21) net income $ 25,811 $

6 Reconciliation of selected measures to Non-GAAP based measures for the nine months ended. Nine Months Ended Adjustments Note Non- Cost of revenues Cloud services 55,435 (80) (1) 55,355 Customer Support 81,597 (275) (1) 81,322 Professional Service and Other 144,498 (660) (1) 143,838 Amortization of acquired technology-based intangible assets 70,031 (70,031) (2) gross profit/ Non- gross profit 651,930 71, ,976 Research and development 121,627 (1,167) (1) 120,460 Sales and marketing 209,819 (5,953) (1) 203,866 General and administrative 85,199 (2,018) (1) 83,181 Amortization of acquired customer-based intangible assets 51,548 (51,548) (2) Special charges 17,267 (17,267) (3) income from operations / Non- income from operations 148, , ,191 Other income (expense), net 1,707 (1,707) (4) Provision for income taxes 30,559 9,229 (5) 39,788 net income / Non- net income 106, ,063 (6) 244,411 earnings per share / Non- earnings per share-diluted $ 1.80 $ 2.34 (6) $ 4.14 (1) Adjustment relates to the exclusion of share based compensation expense from our non- operating expenses as this expense is excluded from our internal analysis (2) Adjustment relates to the exclusion of amortization expense from our non- operating expenses as the timing (3) Adjustment relates to the exclusion of Special charges from our non- operating expenses as Special charges hence excluded from our internal analysis (4) Adjustment relates to the exclusion of Other income (expense) from our non- operating expenses as Other related to continuing operations and are hence excluded from our internal analysis (5) Adjustment relates to differences between the tax provision of approximately 22% and a non- Nine Months Ended Non- net income $ 244,411 $ 4.14 Amortization 121, Share-based compensation 10, Special charges 17, Other (income) expense, net (1,707) (0.03) provision for income taxes 30, Non- provision for income taxes (39,788) (0.67) net income $ 106,348 $

7 Reconciliation of selected measures to Non-GAAP based measures for the three months ended December 31, December 31, 2012 Adjustments Note Non- Cost of revenues Cloud services 18,261 (30) (1) 18,231 Customer Support 28,277 (107) (1) 28,170 Professional Service and Other 47,664 (188) (1) 47,476 Amortization of acquired technology-based intangible assets 23,191 (23,191) (2) gross profit/ Non- gross profit 229,456 23, ,972 Research and development 38,718 (331) (1) 38,387 Sales and marketing 67,977 (1,653) (1) 66,324 General and administrative 30,005 (865) (1) 29,140 Amortization of acquired customer-based intangible assets 17,147 (17,147) (2) Special charges 2,269 (2,269) (3) income from operations / Non- income from operations 67,235 45, ,016 Other income (expense), net 1,541 (1,541) (4) Provision for income taxes 3,153 12,037 (5) 15,190 net income / Non- net income 61,108 32,203 (6) 93,311 earnings per share / Non- earnings per share-diluted $ 1.04 $ 0.54 (6) $ 1.58 (1) Adjustment relates to the exclusion of share based compensation expense from our non- operating expenses as this expense is excluded from our internal analysis (2) Adjustment relates to the exclusion of amortization expense from our non- operating expenses as the timing (3) Adjustment relates to the exclusion of Special charges from our non- operating expenses as Special charges hence excluded from our internal analysis (4) Adjustment relates to the exclusion of Other income (expense) from our non- operating expenses as Other related to continuing operations and are hence excluded from our internal analysis (5) Adjustment relates to differences between the tax provision of approximately 5% and a non- December 31, 2012 Non- net income $ 93,311 $ 1.58 Amortization 40, Share-based compensation 3, Special charges 2, Other (income) expense, net (1,541) (0.03) provision for income taxes 3, Non- provision for income taxes (15,190) (0.25) net income $ 61,108 $

8 Reconciliation of selected measures to Non-GAAP based measures for the six months ended December 31, Six Months Ended December 31, 2012 Adjustments Note Non- Cost of revenues Cloud services 36,544 (30) (1) 36,514 Customer Support 54,100 (145) (1) 53,955 Professional Service and Other 96,246 (365) (1) 95,881 Amortization of acquired technology-based intangible assets 46,973 (46,973) (2) gross profit/ Non- gross profit 435,012 47, ,525 Research and development 78,624 (669) (1) 77,955 Sales and marketing 132,492 (3,319) (1) 129,173 General and administrative 58,138 (1,748) (1) 56,390 Amortization of acquired customer-based intangible assets 34,399 (34,399) (2) Special charges 11,823 (11,823) (3) income from operations / Non- income from operations 107,322 99, ,793 Other income (expense), net 1,470 (1,470) (4) Provision for income taxes 19,372 8,335 (5) 27,707 net income / Non- net income 80,537 89,666 (6) 170,203 earnings per share / Non- earnings per share-diluted $ 1.37 $ 1.52 (6) $ 2.89 (1) Adjustment relates to the exclusion of share based compensation expense from our non- operating expenses as this expense is excluded from our internal analysis (2) Adjustment relates to the exclusion of amortization expense from our non- operating expenses as the timing (3) Adjustment relates to the exclusion of Special charges from our non- operating expenses as Special charges hence excluded from our internal analysis (4) Adjustment relates to the exclusion of Other income (expense) from our non- operating expenses as Other related to continuing operations and are hence excluded from our internal analysis (5) Adjustment relates to differences between the tax provision of approximately 19% and a non- Six Months Ended December 31, 2012 Non- net income $ 170,203 $ 2.89 Amortization 81, Share-based compensation 6, Special charges 11, Other (income) expense, net (1,470) (0.02) provision for income taxes 19, Non- provision for income taxes (27,707) (0.48) net income $ 80,537 $

9 Reconciliation of selected measures to Non measures for the three months ended March 31, measures March 31, 2012 Adjustments Note Non- measures Cost of Revenues: Customer Support 27,987 (53) (1) 27,934 Professional Service and Other 52,596 (203) (1) 52,393 Amortization of acquired technology-based intangible assets 21,264 (21,264) (2) gross profit/ Non- gross profit 185,951 21, ,471 Research and development 41,738 (1,028) (1) 40,710 Sales and marketing 69,572 (2,594) (1) 66,978 General and administrative 21,999 (1,287) (1) 20,712 Amortization of acquired customer-based intangible assets 13,462 (13,462) (2) Special charges 6,450 (6,450) (3) income from operations / Non- income from operations 27,303 46,341 73,644 Other income (expense), net (1,804) 1,804 (4) Provision for (recovery of) income taxes (14,036) 23,680 (5) 9,644 net income / Non- net income 34,774 24,465 (6) 59,239 earnings per share / Non- earnings per share-diluted $ 0.59 $ 0.42 (6) $ 1.01 (1) Adjustment relates to the exclusion of share based compensation expense from our non- operating expenses as this expense is excluded from our internal analysis (2) Adjustment relates to the exclusion of amortization expense from our non- operating expenses as the timing (3) Adjustment relates to the exclusion of Special charges from our non- operating expenses as Special charges hence excluded from our internal analysis (4) Adjustment relates to the exclusion of Other income (expense) from our non- operating expenses as Other related to continuing operations and are hence excluded from our internal analysis (5) Adjustment relates to differences between the tax recovery of approximately 68% and a non- March 31, 2012 Non- net income $ 59,239 $ 1.01 Amortization 34, Share-based compensation 5, Special charges 6, Other (income) expense, net 1, provision for (recovery of) income taxes (14,036) (0.24) Non- provision for income taxes (9,644) (0.16) net income $ 34,774 $

10 Reconciliation of selected measures to Non measures for the nine months ended March 31, measures Nine Months Ended March 31, 2012 Adjustments Note Non- measures Cost of Revenues: Customer Support 82,724 (112) (1) 82,612 Professional Service and Other 153,551 (408) (1) 153,143 Amortization of acquired technology-based intangible assets 63,307 (63,307) (2) gross profit/ Non- gross profit 588,350 63, ,177 Research and development 127,848 (2,872) (1) 124,976 Sales and marketing 202,903 (6,040) (1) 196,863 General and administrative 72,886 (3,974) (1) 68,912 Amortization of acquired customer-based intangible assets 39,948 (39,948) (2) Special charges 18,776 (18,776) (3) income from operations / Non- income from operations 109, , ,107 Other income (expense), net 10,145 (10,145) (4) Provision for (recovery of) income taxes (8,542) 41,295 (5) 32,753 net income / Non- net income 117,203 83,997 (6) 201,200 earnings per share / Non- earnings per share-diluted $ 2.00 $ 1.43 (6) $ 3.43 (1) Adjustment relates to the exclusion of share based compensation expense from our non- operating expenses as this expense is excluded from our internal analysis (2) Adjustment relates to the exclusion of amortization expense from our non- operating expenses as the timing (3) Adjustment relates to the exclusion of Special charges from our non- operating expenses as Special charges hence excluded from our internal analysis (4) Adjustment relates to the exclusion of Other income (expense) from our non- operating expenses as Other related to continuing operations and are hence excluded from our internal analysis (5) Adjustment relates to differences between the tax recovery of approximately 8% and a non- Nine Months Ended March 31, 2012 Non- net income $ 201,200 $ 3.43 Amortization 103, Share-based compensation 13, Special charges 18, Other (income) expense, net (10,145) (0.17) provision for (recovery of) income taxes (8,542) (0.15) Non- provision for income taxes (32,753) (0.56) net income $ 117,203 $

11 (3) The following table provides a composition of our major currencies for revenue and expenses, expressed as a percentage, for the three and nine months ended : Currencies % of Revenue % of Expenses* EURO 29% 17% GBP 8% 8% CAD 6% 19% USD 47% 42% Other 10% 14% Total 100% 100% Nine Months Ended Currencies % of Revenue % of Expenses* EURO 26% 17% GBP 8% 8% CAD 6% 18% USD 49% 43% Other 11% 14% Total 100% 100% *Expenses include all cost of revenues and operating expenses included within the Consolidated Statements of Income, except for amortization of intangible assets, share-based compensation and Special charges. 11